Here’s an utterly confusing situation, which I suppose is why there has been an arbitration, two lawsuits, and an appeal to the 9th Circuit with an unpublished decision. People, get the paperwork right.

A license to the MARILYN trademark from Parkinson to Robanda in a letter also dated December 1, 2008.

The APA purportedly assigned the trademark, in about as badly-worded an agreement as I’ve ever seen:

1.2 Purchase and Sale of Assets. Seller agrees to sell to Buyer, and Buyer agrees to purchase from Seller at Closing all of Seller’s right, title and interest in and to all of the assets identified herein and on the attached Schedule 1 and designated as (the “Assets”) [sic], with the following limitations …

(c) All rights, title and interest in and to the trade names, logos, copyrights, service marks, trademarks, (with limitations as identified in section 1.2 [sic, 1.3?]) licenses, and the gooodwill associated with the Business listed on Schedule 3 (the “Intangible Property”).

1.3 Transfer of Purchased Assets. Five (5) years after the closing date, Seller will assist Buyer in any manner necessary for the transfer to Buyer of the ownership of the assets, contracts and commensurate rights, trade names, logos, copyrights, service marks and trademarks. During this five (5) year term Buyer shall license all rights for use and distribution thereof under a separate agreement attached as Exhibit 1 and described Trademark License for their exclusive* and uninterrupted use. Five (5) years after the closing date and upon completion of the payments as specified in Article 3, Buyer shall own outright, without limitation, all such rights, titles and interest identified herein.

There are no exhibits in the agreement filed with the court, but I believe it is safe to assume that the letter dated December 1, 2008 is the Trademark License referred to in the APA. It says:

This letter will authorize [Robanda] to have complete and free use of the Marilyn® trademark for a period of five years from this date without compensation or consideration paid to me as its registered owner.

You have purchased the inventory and goodwill of the Marilyn brand from Camelot and entered into an arrangement to use the services of Tony Parkinson from a period of 5 years from this date … Upon the final payment made to Mr. Parkinson,** I will immediately assign and transfer the trademark to Robanda.

(Emphasis added.) There is also recitation of quality control, although we don’t know whether Robanda ever complied with the terms.

Let’s summarize here. We have Camelot assigning the trademark and registration (defined as separate assets in the document) to Parkinson, without reservation, on September 30, 2008. We then have, on December 1, 2008, Camelot also presently assigning (or maybe not assigning for five years) the trademark to Robanda. Then we have a “license” from Parkinson acknowledging that Camelot had assigned the trademark and the goodwill to Robanda, but then also saying that Parkinson will assign the trademark in five years.

The first lawsuit, filed on March 1, 2013, was Robanda suing Parkinson for a declaration that it owned the MARILYN trademark with some blurriness around the legal basis, assignment-in-gross or naked license. The suit was dismissed without prejudice based on licensee estoppel; the five-year license period had not run so Robanda was estopped from bringing the lawsuit.

Without attempting to construe these agreements or resolve any inconsistencies at this stage of the proceedings, the district court determined that the assignment to Parkinson was an invalid assignment in gross because she did not allege that she ever sold products under the Mark and admitted that Camelot sold the business assets to Robanda. That cannot, however, be the end of the inquiry because we have previously upheld a trademark assignment even when someone other than the assignee possessed and distributed the business assets associated with a trademark. E & J Gallo Winery v. Gallo Cattle Co., 967 F.2d 1280, 1290 (9th Cir. 1992). In fact, it is a “well-settled commercial practice” to engage in what is referred to as an “assignment/license-back” agreement—a transaction in which Company A assigns a trademark to Company B, but continues to utilize the trademark under a license with Company B. Id. Such agreements are valid so long as the transfer “does not disrupt continuity of the products or services associated with a given mark,” such as when the assignee receives sufficient information “to continue the lure of the business” that had been established prior to the assignment. Id. at 1289-90.

Admittedly, the circumstances in the case before us are different from the ordinary assignment/license-back agreement because the agreements here involve three parties instead of only two. Our inquiry, however, should functionally be the same: did the transaction as a whole “disrupt the continuity of the products or services associated with a given mark”? Id. at 1290.

As currently alleged, the complaint fails to show that a disruption did not occur. Unlike the assignment/license-back agreement that we upheld in Gallo, Parkinson has not alleged that she was provided with “information ‘sufficient to enable [her] to continue the lure of business [Camelot] had been conducting under the [Marilyn Mark]'” or that she had any related expertise that would allow her to appropriately maintain the quality of the Mark through her license to Robanda. Id. at 1289. Without such allegations, it is impossible to conclude—especially in light of the contradictory statements in the contracts forming this three-party agreement—that Parkinson received a valid assignment. We agree, therefore, that the dismissal was not improper.

However, over a dissent, the appeals court instructed the district court to allow Parkinson to amend the complaint to allege facts showing that she had maintained control sufficient to ensure continuity of the mark. The dissent would not have granted leave to amend; Parkinson’s letter said that Camelot assigned the goodwill to Robanda and none of the other agreements contradicted that.

It’s unfair of me to criticize the Court of Appeals opinion; it is unpublished and kicks the case back to the district court for a do-over. But I don’t find the legal analysis well-reasoned or the license letter particular damning. There was a clear assignment of the trademark and its registration on September 30, 2008 from Camelot to Parkinson; nothing in the record ties this transaction to the later APA. Therefore, no matter what the APA says, Camelot could not have thereafter assigned the trademark to Robanda. Sure, fraud in the inducement in the APA for claiming to assign a substantial asset it didn’t own, and perhaps even some kind of equitable relief to undo the assignment† since it’s a good guess that Nina Parkinson and Tony Parkinson were working cooperatively and it was all part of some big picture not apparent in the opinions. But the APA could not have effected a legal assignment of the mark.

Parkinson was the owner of the trademark and, by letter, licensed it to Robanda. That’s the only document that matters. So what if the letter says that Camelot assigned the goodwill to Robanda; saying it doesn’t make it true, nor do I suspect either Camelot or Parkinson would say that the assignment was anything but unconditional. Instead, this is, not an assignment/license-back as characterized by the appeals court, but an assignment from Company A to Person B and a license from Person B to Company C, with an assignment from Person B to Company C after five years, conditioned on full payment to a third party to the agreement, Person D. The court made it a lot harder that it really is.

* Yeah, which it couldn’t do, seeing as it had already granted perpetual use to Plasticos Vandux de Colombia S.A. in 2004, in exchange for assignment of the registration Vandux had obtained for the MARILYN mark to Camelot. But we’ll just skip over that.

** Further drafting travesty. Camelot is who gets paid, not Tony Parkinson.

† I just made that up. I have no idea whether it’s possible. That’s the beauty of writing a blog, you can just make it up. But you should disclose that you did. Unlike here.

5 Responses to What the Paperwork Says

Dan

March 7, 2016 at 5:58 pm

Based on the 9th Circuit oral argument, the panel apparently concluded [I think correctly] that (1) the assignment from Camelot to Nina Parkinson, (2) her 5-year license to Robanda with (3) a transfer of the mark at the end of that time was merely a ruse to hold Robanda hostage to its promise to pay Tony Parkinson [her brother] a 5-year consulting fee negotiated as part of Robanda’s purchase of Camelot’s business.

Nina Parkinson, as the trademark “owner,” had, as a factual matter, no opportunity or authority to control the quality of the products Robanda was selling under the Marilyn mark. Discounting that Camelot to Parkinson naked assignment –or perhaps weighing it against the assignment in the APA – the panel punted the case back down to permit Parkinson the opportunity to allege facts she could assert control.

Considering their level of sophistication, I doubt the Parksinson’s crafted their strategy with the intention of creating a security interest. They’re likely unfamilar with that tool [which would’ve accomplished their goal]. My metaphor could have been more clear: The trademark to them was nothing but a weapon Nina Parkinson could brandish to compel Robanda to pay Tony Parkinson. When Robanda was told it didn’t have to, Nina used her weapon by suing for infringement. This wasn’t licensor – licensee. This was do as I want, or else.

According to Robanda’s counsel at oral argument [at 17:15 – 18:15 min], an arbitrator ruled against Tony Parkinson in his dispute with Robanda over his “personal services agreement.”

Because the only obligation in that agreement was Robanda’s to pay Parkinson “10% of Net Invoice payable quarterly” I’m assuming it stopped. Whatever the dispute or ruling we know from Robanda’s counsel that the ruling triggered Nina’s infringement suit.

The very existence of Tony’s personal services agreement can’t be squared with the integration clause, the “no broker” provision and other terms in the APA. It’s not unusual to carve up the purchase price of a small business into a closing date payment and a continuing payment obligation to the business owner through a personal services agreement. This decreases the buyer’s upfront cost and is a tax avoidance tool for the seller. But it has to be done right — specifically, the APA and the personal services agreement can’t conflict. And splintering off the company’s trademark to an uninterested third party [Nina] in order to secure the continuing payments to the seller is dumb on its face.

Ms. Chestek is admitted to practice in Connecticut, the District of Columbia, Massachusetts, New York and North Carolina and is Board Certified by the North Carolina State Bar's Board of Legal Specialization in Trademark Law.

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